March 28, 2023

50,000 new researchers if Finland wants to reach its R&D-intensity promise


Finland has to find 50,000 new researchers if the government wants to keep its R&D-intensity promise

The government of Finland has set an ambitious goal for itself - to increase yearly research and development (R&D) investments to reach four percent of its gross domestic product (GDP). Reaching this target would bring Finland into the top tier of global innovators, alongside countries like Israel and South Korea.

However, achieving this goal won't be easy. The Finnish Startup Community estimates that annual R&D investments must increase from 6.93 billion euros to 14.51 billion euros between 2020 and 2030. This means that an additional 7.58 billion euros must be invested yearly to meet the R&D-intensity target. One-third of the investments should come from the public sector and two-thirds from the business sector.

To put this in perspective, the required investment is equivalent to doubling the 2020 R&D spending in Finland. Failure to invest this amount means falling short of the R&D-intensity goal, which would be a significant setback for Finland's innovation-driven economy.

Moreover, if Finland wants to keep its promise of R&D intensity, it will need to find 50,000 new researchers to support the effort.

Why do we need new technologies and innovations?

In the long run, innovations are a crucial component for improving economic productivity and enhancing the quality of life. This is why increasing R&D activities is of paramount importance.

For instance, improved medical treatments and medications can significantly boost our lifespan. Additionally, enhanced machines and devices, coupled with advanced network connectivity, can enable us to work more intelligently and offer novel services, like video streaming, that enhance our quality of life.

Furthermore, innovation can make luxury more affordable, bringing products and services previously available only to the wealthy to a wider population. All of these positive developments are the result of R&D activities.

7 and half billion euros more for yearly R&D investments!

The increase of 7.58 billion euros in yearly R&D activities is a significant investment that will have a major impact on the labor market. At current prices, this increase means a whopping 109 percent more money channeled into R&D activities between 2020 and 2030.

R&D activities are the result of the combined efforts of people, machines, devices, laboratories, and other research infrastructure. It's the thinking work of researchers that drives the development of new innovations, which have a significant impact on the welfare of society.

By investing in R&D, Finland can create a virtuous cycle of innovation and economic prosperity. The more resources channeled into R&D, the more innovation it can generate. This innovation, in turn, can lead to new products and services that improve the quality of life for people, while also creating new job opportunities and fueling economic growth.

R&D investments lead to increasing demand for labor

In Finland, personnel costs account for 54.1 percent of R&D expenditures, underscoring the crucial role that people play in driving innovation. According to Statistics Finland, 80,560 individuals held R&D positions in Finland in 2020. With the growth of R&D activities, many more job opportunities should emerge in this field.

Assuming R&D expenditures increase by more than 100 percent, with the same expenditure structure, and a 2.6 percent average annual increase in salary levels for R&D personnel, there will be a need for a 60 percent increase in the number of R&D personnel. This means that Finland will require 49,000 new experts for research and development tasks, or 4,900 new employees every year between 2020 and 2030.

Where on earth do you find the experts?

To address the increasing demand for skilled R&D labor, the Finnish Startup Community believes that a combination of immigration and education is necessary. Immigration can provide a quick solution to the shortage of skilled experts, but education is equally important for long-term growth. This is why the government must invest in education and training programs that help Finnish workers develop the skills needed to excel in R&D activities. By doing so, Finland can build a strong foundation of local talent that can work alongside international experts to drive innovation and growth in the country.

The competition for talent in the global market is fierce, and it's becoming increasingly difficult for startups to find skilled professionals. With Finland's plan to increase public R&D investments, there's a risk that private investments won't follow due to the shortage of talent.

Immigration and education are two different ways to address the need for new experts in research and development. While education is a slower solution, immigration can provide a quick fix.

Youssef Zad, Chief Economist of Finnish Startup Community

If a skilled person can be found on the international labor market, they can be hired relatively quickly if immigration processes are fast and efficient. Education, on the other hand, is a slower solution, as it takes several years for students to graduate and gain the necessary skills.

The availability of labor must be improved

Improving the availability of skilled labor is crucial to ensure the effectiveness of Finland's public and private investments in R&D activities.

The Finnish Immigration Service statistics provide insight into the potential number of labor force capable of RDI activities immigrating to Finland. In 2020, 780 first residence permits were granted with special expert status, and 864 similar permits were granted based on scientific research, making a total of about 1,600 potential workers. In 2022, the number increased to 3,800, showing progress in the right direction.

However, only a portion of this number will be employed in R&D activities, which highlights the need to accelerate the pace of labor availability. We fear that the lack of labor may lead to an increase in the salary level of current researchers, rather than an increase in the number of innovations. It is essential to address this issue promptly to avoid a potential assessment of the ineffectiveness of public contributions to R&D activities, which could have been avoided by improving the availability of labor.

Concrete action to increase the availability of skilled labor

The next government should strongly improve the processes of labor-based migration. The immigration process should be viewed as a customer path that starts with the first physical identification and ends only after bank accounts have been opened and children have a place in school.

Additionally, the next government should look into more attractive tax incentives directed at high-income immigrants and top innovators. According to research tax incentives do matter when it comes to special groups of immigrants.

This blog is based on an opinion piece published in Kauppalehti.

Youssef Zad

Chief Economist